By Nia Williams

(Reuters) -Oil slipped 2% on Tuesday as demand worries due to China’s prolonged COVID-19 lockdowns outweighed support from a possible European oil embargo on Russia.

Beijing, reporting dozens of new cases daily, is mass-testing residents to avert a lockdown similar to Shanghai’s over the past month. The capital’s restaurants were closed for dining in, and some apartment blocks were sealed shut.

Brent crude was down $2.04 or 1.9%, at $105.54 a barrel at 1:18 p.m. EDT (1718 GMT). U.S. West Texas Intermediate (WTI) crude fell $2.06, or 2%, to $103.11 a barrel.

“There are real concerns about whether Chinese demand, which is a huge factor in global demand, will remain strong in 2022,” said Gary Cunningham, director at Tradition Energy.

Still, oil remains strong after Moscow’s invasion of Ukraine exacerbated supply concerns that were already fueling a rally. Brent reached $139 in March, its highest since 2008.

The European Union is working on a sixth round of sanctions against Russia for waging war on Ukraine, a move that is supporting oil prices.

Officials said European Commission President Ursula von der Leyen is expected to spell out the proposed sanctions on Wednesday, and that they would include a ban on imports of Russian oil by the end of this year.

Phil Flynn, an analyst at Price Futures group, said price action would likely remain volatile as traders weighed the impact of China’s lockdowns versus oil sanctions, and ahead of a U.S. Federal Reserve meeting on Wednesday.

“We have a market that’s in flux, and reacting from headline to headline in a very choppy trading range,” Flynn said.

Also in focus will be the latest round of U.S. inventory and supply reports. Five analysts polled by Reuters on average expect U.S. crude inventories fell by 1.2 million barrels last week. [EIA/S]

The American Petroleum Institute industry group issues its inventory report at 4:30 p.m. EDT (2030 GMT), followed by government figures from the Energy Information Administration on Wednesday. [API/S]

(Additional reporting by Alex Lawler and Sonali Paul; Editing by Marguerita Choy, Jason Neely and David Gregorio)